It’s early to talk about fallout and what the attacks mean for business, but we have thoughts, from capital markets to tourism and the wider economy.

UP FIRST- The stock market. The ADX and DFM are both closed today and tomorrow: “The [UAE Capital Market Authority] will continue to monitor developments in the region and assess the situation on an ongoing basis, taking any further measures as necessary,” state news agency Wam reports.

You can expect to see some “orderly repricing rather than a sharp, panic-driven gap down” when markets do open, CFI Financial Market Analyst Christy Achkar told EnterpriseAM. While some expect a sea of red, Achkar argues that the UAE’s unique market architecture — characterized by heavy institutional anchors and sovereign-linked entities — acts as a natural circuit breaker on extreme volatility.

Unlike more retail-driven markets, the UAE’s “strong institutional participation” helps limit irrational selling. Plus, the geopolitical risk premium often comes with a silver lining for the Emirates: higher oil prices. “For the UAE, higher oil prices translate into stronger government revenues, improved fiscal surpluses, and greater system liquidity,” Achkar said. This creates a cushion that supports public spending and maintains confidence even when headlines turn sour.

IN CONTEXT- Saudi’s Tadawul was down nearly 2.2% yesterday, while the EGX30 in Egypt was off 2.5% at the close.

The sectors to watch: Expect “high-beta real estate and financial stocks” to feel the initial heat. Banks and property names are sentiment-sensitive and often serve as the first exit point for investors reducing exposure to growth. Airlines, airports, and tourism look most exposed to cancellations, ins. costs, and confidence shock, Rawad Kassouf, Arqaam Capital head of ECM execution and syndicate, told us.

The safe harbors: Defensive sectors like utilities and energy-related names should remain relatively stable, especially if crude prices remain elevated. Kassouf shared the same opinion, saying that “telecoms and regulated utilities are typically the closest defensives on stable cashflows and dividends, while energy producers offer oil leverage; however, their exports and critical infrastructure could be impacted.”

What’s next: “Clarity matters more than valuation” amid geopolitical tensions, Achkar said. Investors will likely adopt a wait-and-see approach, monitoring global futures and oil before deploying capital.

Watch the first hour of trading after markets open: If the index recovers early losses on steady volume, it signals domestic liquidity is absorbing the shock. “If external conditions stabilize, selective dip-buying could emerge later in the session, supported by domestic liquidity,” Achkar added. “However, continued escalation would likely keep investors defensive and focused on reducing higher-beta exposure.”

BACKGROUND- UAE markets have had a good start to the year: The ADX closed last month up 1.7%, having gained 4.6% YTD, while DFM gained 1.1% in February and 7.5% YTD. Pundits say GCC markets could drop by 3-5% if hostilities continue — the prospect of higher oil prices will likely be insufficient to calm investors’ nerves as regional instability weighs heavier.

The impact on the wider economy will take longer to assess: “The economic fallout from the attacks by the US and Israel on Iran […] will depend on how long the conflict lasts, the scale of Iranian retaliations and the spillovers to the oil market,” Capital Economics Chief Emerging Markets Economist William Jackson said in a note out just after the initial attacks on Iran began.

What to watch: Aviation and tourism

Perhaps the biggest negative impact for the UAE will be on tourism, a mainstay of the economy. The UAE has long been seen as a safe destination with a plethora of luxury attractions for high-net-worth individuals and others who want to take a break from cold winters and seek the sunny beaches of the UAE, especially this time of year.

Widespread airspace closures and massive flight disruptions spread through the region and hit the UAE over the weekend. Iran, Israel, Iraq, Qatar, Bahrain, and Kuwait completely shut their skies to commercial traffic, while the UAE, Syria, and Oman severely restricted flights.

The world’s busiest airport, Dubai International Airport, sustained “minor damage” to a concourse, according to Dubai Media Office, while videos circulated of smoke and fallen debris inside its Terminal 3 on Saturday night. Zayed International Airport in Abu Dhabi was also hit the same night, with one fatality reported and seven injuries.

The airline situation:

• Emirates suspended all flights until today 3pm Dubai time, while Etihad suspended all flights to and from Abu Dhabi until 2pm;
• International airlines including Turkish Airlines, Air India, Lufthansa, British Airways, KLM, and more canceled or suspended flights to the UAE and other points in the region for several days;
• Saudia canceled all flights to Amman, Kuwait, Dubai, Abu Dhabi, Doha, Bahrain, Moscow, and Peshawar until midnight Monday, 2 March;
• Flynas and Flyadeal also asked passengers to check their apps for cancellations.

Authorities in Abu Dhabi and Dubai are trying to make it up to tourists stuck here due to the airspace situation as much as possible, with both emirates instructing hotels to allow guests to stay beyond their planned bookings. Abu Dhabi is also footing the bill for hotel extensions.

What to watch: Oil

If the conflict remains a “limited set of strikes” — which we’ve likely already surpassed — Capital Economics’ Jackson sees oil reaching USD 80 / bbl, up from the USD 73 that Brent crude was selling at before markets closed for the weekend. But with Iranian strikes on American bases in the region and rhetoric from the White House suggesting American aggression will only end with full regime change, we are likely looking at a “longer conflict that causes disruptions to supply” and “could send prices much higher — with a material effect on global inflation.”

Are we headed to USD 100 oil? Despite the buildup of American forces in the region, which has led to a “political risk premium baked into the oil price,” disruptions to oil flows out of the region could see us hit USD 100 / bbl for the first time since 2022. “This move would reflect not only the probability of physical disruption but also the extreme uncertainty surrounding maritime flows, retaliation dynamics, and political escalation,” Rystad Energy’s Jorge Leon tells EnterpriseAM.

A prolonged Hormuz closure could make it difficult to get oil shipments to major markets in Asia. Routing through the Red Sea could also prove difficult if Houthis ramp up attacks, GlobalSource Partners’ Gulf Analyst Justin Alexander tells us.

Maintaining recent revenue levels will be difficult even if oil is priced much higher, which could widen the deficit in the short term, Alexander added. Even if Hormuz returns to business as usual, “prices might remain elevated for some time given the risk of further conflict,” depending on developments on the ground in Iran and reduced Iranian exports.

Opec+ is looking to add supply to the market next month, as we’ve reported in What We’re Tracking Today above, abandoning its previous strategy of modest 137k bbl / d increments, which was due to be resumed after a freeze of supply hikes through the first quarter.

A supply increase won’t necessarily solve the problem: “If crude cannot physically exit the Gulf due to Hormuz constraints, incremental production increases will have limited immediate market impact. In such a scenario, the constraint is not upstream supply capacity but export routes and maritime transit,” Leon tells us.

What to watch: The economy

The UAE’s fiscal exposure remains limited given its “strong sovereign balance sheets, low public debt relative to GDP, and substantial sovereign wealth buffers,” banking and financial consultant Amjad Naser told EnterpriseAM. Higher oil prices could again potentially be a boon, with upward pressure likely strengthening fiscal and external accounts, Naser said.

The UAE is coming into this on a firm footing. Its macro fundamentals are solid, with “sustained non-oil growth, disciplined fiscal management, strong foreign reserves, and continued structural reform initiatives aligned with long-term development strategies,” Naser said. The UAE was forecast to be the fastest-growing economy in the Gulf region this year, according to Oxford Economics. Emirates NBD and the IMF see growth coming in at 5.0%, while the World Bank expects 4.8% growth, driven by broad-based momentum in non-oil activities and a gradual improvement in oil output.

“The banking sector is also well-capitalized, with strong capital adequacy ratios and robust regulatory oversight,” Naser said. In fact, the UAE has historically been a haven for capital inflows during periods of uncertainty in the region, supported by “institutional credibility and policy stability,” he added.

What to watch: Trade and logistics

Three ships were struck yesterday, including one hit by an unidentified projectile northwest of the UAE’s Mina Saqr in Ras Al Khaimah. A second strike reportedly hit a vessel near Sharjah, though its crew was all found to be safe, CNBC Arabia reports. Another incident took place near Oman as a small tanker, Skylight, which appears to be under US sanctions, was hit off its northern coast, with one crew member killed.

The big question is whether Hormuz remains open. We’re already seeing tankers avoid the strait, with Iran’s Tasnim News Agency reporting it is “effectively” closed, although no formal announcement has been made by Tehran. Some ships reported receiving a radio broadcast — reportedly from the Iranian navy — instructing them to leave the waterway as passage is banned.

Iran’s broadcast warnings and the resulting pullback by some traders are a bid to disrupt the flow without the need for formal closure, by “causing enough ambiguity to create a de facto chokepoint shock,” Wolfgang Lehmacher, a supply chain and logistics strategist, tells EnterpriseAM. Whether you’re talking geopolitical risk or investor confidence, that blurs the line between “normal” tension and crisis, forcing a persistent risk premium into energy contracts, shipping equities, and port projects linked to Gulf exports, Lehmacher added.

Pundits think the strait won’t be closed off for long: “If the Strait of Hormuz were to close, the most likely scenario is that it would be temporary, potentially lasting one to two weeks,” Leon said, adding that a prolonged closure would carry severe geopolitical consequences and likely provoke a rapid international response. “That said, even a short-lived disruption would create a significant logistical backlog.”

A full Hormuz closure would be very painful. About 30% of the world’s daily oil supply and 20% of global LNG trade pass through the strait. The UAE moves about 1.5 mn bbl / d of its 2.8 mn bbl / d exports through the strait, Mees reported earlier last year. The UAE currently only has one option for bypassing the strait: the Adcop — or the Habshan-Fujairah pipeline — which connects Adnoc’s Habshan crude oil processing plant in Abu Dhabi with the nation’s Fujairah export terminal on the Indian Ocean. The pipeline has a capacity of 1.8 mn bbl / d — about 67% of the 2.85 mn bbl / d of crude oil exported from the Emirates this year. It does, however, still leave offshore-sourced crude reliant on the strait — about 1.5 mn bbl / d worth — exposed to any prolonged closures

The Houthis are in, too: The Yemeni rebel group signaled its intention to resume missile and drone attacks, making the Red Sea a standing variable in Tehran’s escalation toolkit. That will ensure any additional strikes resonate beyond the Bab El Mandeb, shaping perceptions of risk from Suez to Hormuz and forcing carriers to recalibrate already thin buffers in global container and tanker fleets, Lehmacher said.

Change to logistics routes could be even more widespread in the long term: Repeated stress on the Suez Canal and Hormuz could catalyze a new MENA-doctrine-proof corridor mix. “We are likely to see faster development of African Atlantic and Indian Ocean gateways, greater use of alternative Eurasian and intra‑regional routes, and selective upgrading of Gulf and Eastern Mediterranean ports as contingency hubs for rerouting cargo and services when doctrines or security conditions change,” Lehmacher tells us. Ins., finance, and development capital will follow, with more granular, corridor-specific pricing that rewards better security and governance in other routers.

Operational disruptions also followed for UAE trade hubs, including DP World suspending all operations at Jebel Ali Port as a precautionary measure, halting all activities across the port’s terminals, Bloomberg reports.

Short-term disruptions likely won’t have a major long-term impact, pundits say. “The UAE’s diversified economic base — particularly in financial services, technology, aviation, and re-export trade — significantly mitigates concentration risk,” Naser told us.

What to watch: Diplomacy

The UAE has closed its embassy in Iran and pulled its ambassador from Iran, in a major setback for UAE-Iran relations that had only recently thawed, according to a Foreign Affairs Ministry statement. It also condemned the “hostile attacks against civilian sites, including residential areas, airports, ports, and service facilities,” in the UAE, which it said “endangered innocent civilians in a serious and irresponsible escalation and constitute a flagrant violation of national sovereignty, as well as a clear breach of international law and the Charter of the United Nations.”

President Mohamed bin Zayed Al Nahyan spoke with a long list of leaders over the past hours, including US President Donald Trump. His calls with neighboring leaders focused on the latest regional developments and reiterated the need to halt escalatory actions and return to diplomatic solutions.